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Continued from page 3

The Out-of-Pocket Cost of College

Continuing with our example above, the family might be able to send the student to the expensive private college costing $62,000 per year, for only $30,000 out of their pocket, the amount of the student’s expected contribution (EFC). If the college offers an aid package that covers 100% of the student’s need ($32,000), and it consists primarily of grants, then the family’s out-of-pocket cost for the elite private college truly becomes $30,000 per year instead of the $62,000 annual “sticker price.”

Since the student doesn’t qualify for need-based aid or merit aid at the $22,000 per year state university, the family will have to write a check for the annual $22,000 sticker price. The student in this case, although not eligible for need-based aid, would still be eligible for an unsubsidized Stafford loan of $5,500 as a freshmen (up to $7,500 annually in later years), which would help cover part of the $22,000 out-of-pocket cost, but the student will have to repay the principal and interest after college.

At the end of the college admissions and aid application process, you will arrive at a list of colleges to which the student has been accepted for admission, and have been given an official financial aid award letter by each of those institutions that explains the student’s eligibility for all of the aid that he/she is eligible for and/or has been awarded, including outside scholarships, state grants, student loans, work-study, etc. The aid office at each college “packages” all of this aid and sends the student an award letter explaining the aid package for each student. The award letter also includes the total cost of attendance to enroll for the upcoming academic year, including tuition, fees, room, board, books, travel and personal expenses. Thus, the out-of-pocket cost for each respective college will be the cost of attendance of each college minus the amount of the aid package at each college.

Video: For more financial aid insights, please watch my rare video interview with Mr. Bill Schilling, University Director of Student Financial Aid at the University of Pennsylvania, one of the most highly regarded financial aid experts in the country.

Troy Onink is the CEO of Stratagee.com, a college planning firm that provides college planning services to families and college planning software to professionals. A nationally-known consultant to families, financial advisors, prep schools, the 529 college savings industry and colleges, Troy has pioneered the specialized field of college planning for the past twenty years. You can follow him on Forbes and Twitter @TroyOnink.